The Department of Health and Human Services’ Office of Inspector General today issued a report identifying vulnerabilities in the hospital wage index system for Medicare payments. “As a result of these vulnerabilities, wage indexes may not always accurately reflect local labor prices and, therefore, Medicare payments to hospitals and other providers may not be appropriately adjusted to reflect local labor prices,” the report says. The Centers for Medicare & Medicaid Services uses area wage indexes to adjust hospital payments annually to reflect local labor prices. CMS calculates each area’s wage index based on wage data submitted by acute care hospitals in their Medicare cost reports. OIG issued a number of recommendations for addressing the vulnerabilities.

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